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Recently Canadian singer Alanis Morissette became the latest well-publicized victim of fraud at the hands of one she employed and trusted: http://www.bbc.co.uk/news/amp/36316327. She joins a long list of celebrities who have suffered fraud at the hands of those employed to trust, amongst them the Beatles, Beyoncé, David Bowie, Billy Joel, Bob Dylan, Leonard Cohen, Elvis, the Rolling Stones.

Paradoxically, Alanis was rather prescient of deception in her hit Jagged Little Pill:

And I’m here to remind you

Of the mess you left when you went away

It’s not fair to deny me

Of the cross I bear that you gave to me

You, you, you oughta know

…

Did you forget about me Mr. Duplicity?

Frankly agency fraud shouldn’t happen given the legal relationship between trusted employee and employer and of principal and agent. Why “frankly”? Well, the test of disclosure of such a functionary is “full and frank disclosure“. Fully; Completely (apologies to The Tragically Hip). And “frank” legally denotes fulsome, replete, ongoing. In fact it’s evangelical-sounding: “righteous disclosure”.

Busy employers and principals leave their day-to-day business to others with these individuals tasked to honour the trust placed in them. This is known as “fiduciary“: the duty of utmost good faith. For most of us, this is the same reliance that we place — and duty owed to us — in our advisers, financial, legal and otherwise.

However, many of us have neither the time nor the inclination to supervise our fiduciaries and are thereby left vulnerable to their exercise of discretion. The devil is literally in the details: the very transfer of power to another to look after our affairs, whether corporate or personal, renders us vulnerable to the oft-subtle and relatively latent abuse of that power. It’s the exploitation of this vulnerability that makes abuse of trust reprehensible. We are reminded by Lord Acton of the insidiousness of this dynamic: ‘power corrupts; absolute power corrupts absolutely”.

The legal repercussions of breach of fiduciary duty are and should be enormous. Our laws are replete with reported decisions policing fidelity; in fact there are books written on the subject. Those authorities make clear that breach of duty doesn’t even require bad faith; rather it requires only a departure — however slight — from requisite selfless fidelity. Such breach is civil fraud and instantly gives rise to civil liability based on the powerful remedy of “whatever makes it right”. We call that optimal relief, maximized in favour of the wronged party. And the law aids those harmed in a formidable way: the proof of fidelity is an onus upon those we trust, not the other way around. We call that a reverse onus.

Whether incidental or intended, any departure from righteous behaviour on the part of a fiduciary employee or agent constitutes civil fraud, compelling redress via formidable remedial power; something akin to a Judge’s order to put Humpty Dumpty back together again and back up on the wall. No mean feat but readily available in Equity. Of course, intentional selfish behaviour constitutes criminal fraud and breach of trust: with employees and agents thereby subject to prosecution.

Ironically it is not necessary that we chase our trusted employees and agents for compliance and “righteous” disclosure: it is their ongoing obligation to us. But equally agents have a duty to respond to such inquiry, making the most prophylactic approach vigilance through inquiry. Do your due diligence: ask away, constantly.

Although it’s a crime — literally — that she should have to, undoubtedly Alanis wishes she had occasioned more regular oversight and made more constant inquiry. Perhaps more action from Alanis in keeping with the prescience shown in the lyrics of her hit Hand In My Pocket would have changed the outcome. While successful civil and criminal prosecutions may make it slightly less bitter, being defrauded by her trusted employee and agent is unfortunately a very Jagged Little Pill to have to swallow.

Compare jurisdictions:Employment: Canada

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